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New York Times - Business and Finance Glossary Category: Economy and Finance Date & country: 11/09/2007, USA Words: 2680

General obligation bonds
Municipal securities secured by the issuer's pledge of its full faith, credit, and taxing power.

General partner
A partner who has unlimited liability for the obligations of the partnership.

General partnership
A partnership in which all partners are general partners.

Generic
Refers to the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue.

Geographic risk
Risk that arises when an issuer has policies concentrated within certain geographic areas, such as the risk of damage from a hurricane or an earthquake.

Geometric mean return
Also called the time weighted rate of return, a measure of the compounded rate of growth of the initial portfolio market value during the evaluation period, assuming that all cash distributions are reinvested in the portfolio. It is computed by taking the geometric average of the portfolio subperiod returns.

Gestation repo
A reverse repurchase agreement between mortgage firms and securities dealers. Under the agreement, the firm sells federal agency-guaranteed MBS and simultaneously agrees to repurchase them at a future date at a fixed price.

Gilts
British and Irish government securities.

Ginnie Mae
See:Government National Mortgage Association.

Give up
The loss in yield that occurs when a block of bonds is swapped for another block of lower-coupon bonds. Can also be referred to as 'after-tax give up' when the implications of the profit or loss on taxes are considered.

Glass-Steagall Act
A 1933 act in which Congress forbade commercial banks to own, underwrite, or deal in corporate stock and corporate bonds.

Global bonds
Bonds that are designed so as to qualify for immediate trading in any domestic capital market and in the Euromarket.

Global fund
A mutual fund that can invest anywhere in the world, including the U.S.

Globalization
Tendency toward a worldwide investment environment, and the integration of national capital markets.

GNMA Midget
A GNMA pass-through certificate backed by fixed rate mortgages with a 15 year maturity. GNMA Midget is a dealer term and is not used by GNMA in the formal description of its programs.

GNMA-I
Mortgage-backed securities (MBS) on which registered holders receive separate principal and interest payments on each of their certificates, usually directly from the servicer of the MBS pool. GNMA-I mortgage-backed securities are single-issuer pools.

GNMA-II
Mortgage-backed securities (MBS) on which registered holders receive an aggregate principal and interest payment from a central paying agent on all of their certificates. Principal and interest payments are disbursed on the 20th day of the month. GNMA-II MBS are backed by multiple-issuer pools or custom pools (one issuer but different interest rates that may vary within one percentage point). Multiple-issuer pools are known as 'Jumbos.' Jumbo pools are generally longer and offer certain mortgage…

Gnomes
Freddic Mac's 15-year, fixed-rate pass-through securities issued under its cash program.

Go-around
When the Fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits competitive bids or offers from all primary dealers.

Going-private transactions
Publicly owned stock in a firm is replaced with complete equity ownership by a private group. The shares are delisted from stock exchanges and can no longer be purchased in the open markets.

Gold exchange standard
A system of fixing exchange rates adopted in the Bretton Woods agreement. It involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar.

Gold standard
An international monetary system in which currencies are defined in terms of their gold content and payment imbalances between countries are settled in gold. It was in effect from about 1870-1914.

Golden parachute
Compensation paid to top-level management by a target firm if a takeover occurs.

Good 'til canceled
Sometimes simply called 'GTC', it means an order to buy or sell stock that is good until you cancel it. Brokerages usually set a limit of 30-60 days, at which the GTC expires if not restated.

Good delivery
A delivery in which everything - endorsement, any necessary attached legal papers, etc. - is in order.

Goodwill
Excess of the purchase price over the fair market value of the net assets acquired under purchase accounting.

Government bond
See: Government securities.

Government securities
Negotiable U.S. Treasury securities.

Government sponsored enterprises
Privately owned, publicly chartered entities, such as the Student Loan Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the economy including farmers, homeowners, and students.

Graduated-payment mortgages (GPMs)
A type of stepped-payment loan in which the borrower's payments are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference between what the borrower actually pays and the amount required to fully amortize the mortgage is added to the un…

Graham-Harvey Measure 1
Performance measure invented by John Graham and Campbell Harvey. The idea is to lever a fund's portfolio to exactly match the volatility of the S and P 500. The difference between the fund's levered return and the S&P 500 return is the performance measure.

Graham-Harvey Measure 2
Performance measure invented by John Graham and Campbell Harvey. The idea is to lever the S&P 500 portfolio to exactly match the volatility of the fund. The difference between the fund's return and the levered S&P 500 return is the performance measure.

Grantor trust
A mechanism of issuing MBS wherein the mortgages' collateral is deposited with a trustee under a custodial or trust agreement.

Gray market
Purchases and sales of eurobonds that occur before the issue price is finally set.

Greenmail
Situation in which a large block of stock is held by an unfriendly company, forcing the target company to repurchase the stock at a substantial premium to prevent a takeover.

Greenshoe option
Option that allows the underwriter for a new issue to buy and resell additional shares.

Gross domestic product (GDP)
The market value of goods and services produced over time including the income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S. residents and corporations overseas.

Gross interest
Interest earned before taxes are deducted.

Gross national product (GNP)
Measures and economy's total income. It is equal to GDP plus the income abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.

Gross profit margin
Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold.

Gross spread
The fraction of the gross proceeds of an underwritten securities offering that is paid as compensation to the underwriters of the offering.

Group of five (G-5)
The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that meet periodically to achieve some cooperative effort on international economic issues. When currency issues are discussed, the monetary authorities of these nations hold the meeting.

Group of seven (G-7)
The G-5 countries plus Canada and Italy.

Group rotation manager
A top-down manager who infers the phases of the business cycle and allocates assets accordingly.

Growing perpetuity
A constant stream of cash flows without end that is expected to rise indefinitely.

Growth manager
A money manager who seeks to buy stocks that are typically selling at relatively high P/E ratios due to high earnings growth, with the expectation of continued high or higher earnings growth.

Growth opportunity
Opportunity to invest in profitable projects.

Growth phase
A phase of development in which a company experiences rapid earnings growth as it produces new products and expands market share.

Growth rates
Compound annual growth rate for the number of full fiscal years shown. If there is a negative or zero value for the first or last year, the growth is NM (not meaningful).

Growth stock
Common stock of a company that has an opportunity to invest money and earn more than the opportunity cost of capital.

Guaranteed insurance contract
A contract promising a stated nominal interest rate over some specific time period, usually several years.

Guarantor program
Under the Freddie Mac program, the aggregation by a single issuer (usually an S&L) for the purpose of forming a qualifying pool to be issued as PCs under the Freddie Mac guarantee.

Haircut
The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction (ie. a repo).

Handle
The whole-dollar price of a bid or offer is referred to as the handle (ie. if a security is quoted at 101.10 bid and 101.11 offered, 101 is the handle). Traders are assumed to know the handle.

Hard capital rationing
Capital rationing that under no circumstances can be violated.

Hard currency
A freely convertible currency that is not expected to depreciate in value in the foreseeable future.

Harmless warrant
Warrant that allows the user to purchase a bond only by surrendering an existing bond with similar terms.

Head & shoulders
In technical analysis, a chart formation in which a stock price reaches a peak and declines, rises above its former peak and again declines and rises again but not to the second peak and then again declines. The first and third peaks are shoulders, while the second peak is the formation's head. Technical analysts generally consider a head and shoulders formation to be a very bearish indication.

Hedge
A transaction that reduces the risk of an investment.

Hedge fund
A fund that may employ a variety of techniques to enhance returns, such as both buying and shorting stocks based on a valuation model.

Hedge ratio (delta)
The ratio of volatility of the portfolio to be hedged and the return of the volatility of the hedging instrument.

Hedged portfolio
A portfolio consisting of the long position in the stock and the short position in the call option, so as to be riskless and produce a return that equals the risk-free interest rate.

Hedgie
Slang for a hedge fund.

Hedging
A strategy designed to reduce investment risk using call options, put options, short selling, or futures contracts. A hedge can help lock in existing profits. Its purpose is to reduce the volatility of a portfolio, by reducing the risk of loss.

Hedging demands
Demands for securities to hedge particular sources of consumption risk, beyond the usual mean-variance diversification motivation.

Hell-or-high-water contract
A contract that obligates a purchaser of a project's output to make cash payments to the project in all events, even if no product is offered for sale.

Herstatt risk
The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk.

High price
The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.

High-coupon bond refunding
Refunding of a high-coupon bond with a new, lower coupon bond.

High-yield bond
See:junk bond.

Highly leveraged transaction (HLT)
Bank loan to a highly leveraged firm.

Historical exchange rate
An accounting term that refers to the exchange rate in effect when an asset or liability was acquired.

Hit
A dealer who agrees to sell at the bid price quoted by another dealer is said to 'hit' that bid.

Holder-of-record date
The date on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock rights. Also called date of record.

Holding company
A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.

Holding period
Length of time that an individual holds a security.

Holding period return
The rate of return over a given period.

Homemade dividend
Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.

Homemade leverage
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can duplicate the affects of corporate leverage on their own. Thus, if levered firms are priced too high, rational investors will simply borrow on personal accounts to buy shares in unlevered firms.

Homogeneity
The degree to which items are similar.

Homogeneous
Exhibiting a high degree of homogeneity.

Homogenous expectations assumption
An assumption of Markowitz portfolio construction that investors have the same expectations with respect to the inputs that are used to derive efficient portfolios: asset returns, variances, and covariances.

Horizon analysis
An analysis of returns using total return to assess performance over some investment horizon.

Horizon return
Total return over a given horizon.

Horizontal acquisition
Merger between two companies producing similar goods or services.

Horizontal analysis
The process of dividing each expense item of a given year by the same expense item in the base year. This allows for the exploration of changes in the relative importance of expense items over time and the behavior of expense items as sales change.

Horizontal merger
A merger involving two or more firms in the same industry that are both at the same stage in the production cycle; that is two or more competitors.

Horizontal spread
The simultaneous purchase and sale of two options that differ only in their exercise date.

Host security
The security to which a warrant is attached.

Hot money
Money that moves across country borders in response to interest rate differences and that moves away when the interest rate differential disappears.

Hubris
An arrogance due to excessive pride and an insolence toward others.

Human capital
The unique capabilities and expertise of individuals.

Hurdle rate
The required return in capital budgeting.

Hybrid
A package containing two or more different kinds of risk management instruments that are usually interactive.

Hybrid security
A convertible security whose optioned common stock is trading in a middle range, causing the convertible security to trade with the characteristics of both a fixed-income security and a common stock instrument.

Idiosyncratic Risk
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm specific and can be diversified through holding a portfolio of stocks.

Immediate settlement
Delivery and settlement of securities within five business days.

Immunization
The construction of an asset and a liability that are subject to offsetting changes in value.

Immunization strategy
A bond portfolio strategy whose goal is to eliminate the portfolio's risk against a general change in the rate of interest through the use of duration.

Implied call
The right of the homeowner to prepay, or call, the mortgage at any time.